Appeals court upholds eBay victory in trademark case

An appeals court has upheld a previous decision that said eBay wasn't …

eBay is not responsible for upholding third-party trademarks when it comes to counterfeit goods being sold on the site, according to the US Second Circuit Court of Appeals in New York. The Court of Appeals upheld a lower court's decision Thursday, noting that as long as eBay responds to complaints about counterfeit products by removing the listings, the company isn't liable for what gets listed.

Famed jeweler Tiffany & Co. first sued eBay in 2006 alleging that the vast majority of Tiffany items sold through eBay were fakes. The company said that eBay was pocketing possibly millions of dollars in fees for these counterfeit listings and that it was complicit in making these counterfeit goods available to the Internet-using public. Part of Tiffany's argument stemmed from eBay's auto-generated ads, which occasionally scraped up a counterfeit listing to be displayed to prospective eBay users.

The company wanted eBay to be more proactive in blocking unapproved Tiffany listings, but in 2008, a federal judge ruled that Tiffany was the one responsible for policing Tiffany knock-offs, not eBay. Additionally, the judge said that merely using the word "Tiffany" in a listing didn't necessarily rise to the level of trademark infringement. He said the use of the Tiffany name fell under what's termed nominative fair use—since Tiffany has developed a brand associated with specific characteristics in terms of style and quality, using its name as an adjective to describe one of its pieces falls under fair use.

Tiffany pushed back, but the decision was upheld on appeal today. "It is true that eBay did not itself sell counterfeit Tiffany goods; only the fraudulent vendors did, and that is in part why we conclude that eBay did not infringe Tiffany's mark," reads the Appeals Court opinion. The court did not, however, hand eBay the victory when it came to Tiffany's advertising complaint. "We return the cause to the district court for further proceedings with respect to Tiffany's false advertising claim."

Unsurprisingly, Tiffany was not pleased with the Appeals Court's decision, telling the Wall Street Journal that eBay has a responsibility to protect consumers. "eBay knew that counterfeit merchandise was being sold on its site—and eBay took no effective steps to stop it. EBay deliberately misled consumers for profit, and unfortunately, the court has justified its actions. The consumer is the real loser today," Tiffany CEO Michael J. Kowalski said.